Air New Zealand has maintained profitability even as it adapts to a lower growth environment, reporting a NZ$198 million ($124 million) EBIT for the six months ended 31 December 2019, down from NZ$217 million in the year-ago period.
“Our capacity discipline on existing routes, stimulation of leisure traffic with the domestic fare restructure and entrance into attractive new international markets has driven good revenue performance in the first half,” says chairman Therese Walsh.
“Alongside our focus on profitable top-line growth, we are on track to deliver the long-term sustainable cost savings target from our business review initiatives.”
Operating revenue gained 3% to NZ$3 billion, in tandem with 3.2% growth in the passenger segment that accounts for more than 85% of total revenues.
The carrier attributes this to “solid demand” across its domestic and Pacific Islands networks, as well as new routes into Asia and North America. These factors offset an 8.5% decline in cargo revenue while mitigating the pressures on trans-Tasman and Hong Kong routes.
“Our capacity discipline on existing routes, stimulation of leisure traffic with the domestic fare restructure and entrance into attractive new international markets has driven good revenue performance in the first half” - Air New Zealand chairman Therese Walsh
Meanwhile, operating costs gained 3.5% to NZ$2.4 billion, on the back of higher expenditure on maintenance, aircraft operations and passenger services. Despite lower energy prices, Air NZ saw fuel costs increase by 1.1% due to currency losses and greater consumption from growing its international network.
Separately, the addition of new, energy-efficient aircraft drove up ownership costs by 7.1%.
Rising costs notwithstanding, operating profit inched up by 1% to NZ$615 million in the six months ended 31 December 2019, though net profit fell by about a third to NZ$101 million.
As at 31 December 2019, cash balance stood at NZ$1 billion, 4.9% lower than at 30 June.
From July to December 2019, capacity increased by 2.8%, owing to new Chicago and Taipei routes as well as increased frequency to Singapore, among other network changes.
Long-haul RASK fell 1.9% but load factor gained 1.1 percentage points to 85.2%, while short-haul RASK improved by 2.7% as load factor inched up by 0.8 percentage points to 83.3%. Overall passenger load factor increased by 0.9 percentage points to 84.3% while RASK was “comparable with the previous period”.
Air NZ states that Greg Foran, who was appointed chief executive this month, will evaluate the airline’s opportunities and risks in his first 100 days to drive long-term sustainability.
It adds: “This will provide the basis for determining potential changes to the future strategic direction of the airline.”
Earlier this week, Air NZ disclosed target earnings before other significant items and taxation of NZ$300-350 million for financial year 2020, with an estimated NZ$35-75 million impact from the coronavirus outbreak.
Elaborating on a previously announced 17% decline in total Asia capacity from February through June, the carrier expects to make “further capacity reductions on other markets that are showing signs of weakness,” beyond temporary suspension of services into Shanghai and Seoul. This includes the Hong Kong and Japan routes but to a lesser extent, it says.
